Shares of MetLife (NYSE: MET) plunged more than 8.5% on Thursday after announcing earnings well under expectations and a $2 billion charge related to its planned spinoff of the U.S. retail business.
MetLife reported second-quarter earnings late Wednesday of 83 cents, below Reuters’ expectations of $1.35 a share and down from $1.56 the same period last year. Total operating revenue fell 2.3 percent to $16.96 billion.
“It’s a tough environment for life insurers,” said Brett Horn of Morningstar. “I don’t know it was necessarily that great a surprise. I think a low interest [rate] environment hurts life insurers, and there’s not necessarily any clear end in sight, and there’s some frustration on the part of the market.”
In preparation for the separation of its U.S. retail unit, MetLife reviewed its variable annuity product. The study prompted an increase in reserves, or a $2 billion charge, partly due to the increase of the percentage of policyholders who choose to withdraw funds rather than to accept MetLife’s offer of a fixed income annuity.
That and other “changes in policyholder behavior assumptions” accounted for about $1.5 billion in charges, the release said. The remaining half billion was attributed to related “changes in economic and other actuarial assumptions.”